FinancialAdvisor's College Class (FACC)

[FinancialAdvisor]

Fitch Cuts General Motors' Credit Rating

Fitch Cuts General Motors' Credit Rating
By DEE-ANN DURBIN, AP Auto Writer
Wed Nov 9, 5:54 PM ET

DETROIT - General Motors Corp.'s credit rating took another hit Wednesday as Fitch Ratings lowered its rating on the automaker's debt deeper into "junk" status.

Fitch downgraded GM's issuer default and senior unsecured debt ratings two levels to BB+ , one notch below investment grade. The ratings agency said it was concerned about the costs GM might incur as its former parts division, Delphi Corp., restructures in bankruptcy court.

Fitch didn't lower the rating for GM's finance arm, General Motors Acceptance Corp., because the automaker announced last month it wants to sell a controlling interest in GMAC to a strategic partner. Fitch said it will consider lowering GMAC's rating if GM doesn't make progress on that sale in the first quarter of 2006.

GM has said it could be liable for up to $12 billion in benefits for Delphi employees as part of the supplier's restructuring. In addition to that financial burden, Fitch said GM also is at risk if Delphi and its unions fail to agree on wages and benefits.

"A labor disruption at Delphi for any extended period would have an immediate impact on GM's ability to operate and would quickly reduce liquidity," Fitch said.

GM had $19.2 billion in cash as of Sept. 30, Fitch said. The company has $31 billion in outstanding debt.

GM spokeswoman Gina Proia said the company is taking steps to restore profitability, including reaching a tentative agreement with the
United Auto Workers to cut health care costs, reducing its structural costs and committing to using 100 percent of its North American plant capacity by 2008.

"GM has aggressive plans in place to restore North American operations to profitability as quickly as possible," Proia said.

GM shares fell $1.23, or nearly 5 percent, to close at $24.63 on the
New York Stock Exchange.

___

On the Net:

General Motors Corp.: http://www.gm.com


LINK: http://news.yahoo.com/s/ap/20051109/ap_on_bi_ge/gm_debt_rating